Halloween's Secretive Costume and Candy Industries

The Vice President of the Halloween Industry Association talks about this year's projected profits.

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MINYANVILLE ORIGINAL Leading into an expected end-of-the-year consumer spending splurge, one could think of Halloween as a holiday season primer. Last week, the global leader in foot traffic analysis, ShopperTrak, predicted that November and December holiday retail sales will increase 3.3% in the upcoming season, on the rise from the prior year. Growth in foot traffic is expected to be positive for the first time in half a decade.

Halloween is the United States' second largest retail holiday (behind Christmas) and Americans are expected to spend an unprecedented $8 billion on Halloween this year, according to a National Retail Federation report. That's up about 10% from last year. It's estimated that 170 million Americans will celebrate, and that's just counting the adults! According to the reprot, average projected individual spending could be nearly $80 per person, $7.50 more than 12 months ago.

Tempe Krieger is a founding member and Vice Chairman of the Halloween Industry Association -- the largest trade organization representing Halloween costumes, party supplies, etc. -- and the Director of Sales for Elope Inc, or Everybody's Laughing On Planet Earth Incorporated -- a Colorado-based costume and accessory designer and wholesaler. He tells Minyanville he's a little surprised by the projected sales numbers.

"It's on a Wednesday! Which, in fact, shows the strength of the holiday due to the fact that it is a Wednesday. Traditionally this is the weakest day of the week for Halloween. Usually we'll see a Friday or Saturday Halloween being the busiest ones, with the middle of week being on the slow side."

Elope.com currently sells over 18,000 different items online, be it their best-selling Where's Waldo costumes -- the company has exclusive distribution rights for the Where's Waldo property -- to a long list of fully-licensed headwear and accessories.

Some of the strongest selling costumes of the year are Disney (NYSE:DIS) subsidiary Marvel Comics properties like Spider Man, Iron Man, and the rest of the Avengers team. Not surprisingly, films often drive which costumes will be popular.

As a wholesaler, Krieger supplies costume stores ranging from independent mom and pop shops to seasonal pop-up shops like Spirit, Halloween City, Halloween Adventure, and Halloween Bootique (no, that's not a typo). Websites like buycostumes.com and other online retailers including Amazon (NASDAQ:AMZN) have seen sales grow increasingly over the past six or so years, Krieger explains.

But beyond this, Krieger's lips are sealed.

"As fun of an industry we are, we are a highly competitive group."

Taking a step back: If a record-breaking spending year falls on the traditionally lowest spending day, could Americans' willingness to spend more on Halloween be an indicator of bolstered consumer confidence?

Krieger looks at things a little differently.

"I think everybody wants to have a little bit of fun, to be somebody different than who they are currently and let go of the stresses of everyday life, especially right now."

He goes on to highlight the fact that Halloween has gone from being a holiday for children to a holiday for people of all ages. Or, in other terms, Halloween's customer base has been expanding, rapidly.

Fun-Sized Earnings

In light of the economic downturn, and despite expected record spending, consumers do have an eye on their wallets. The aforementioned NRF survey estimates that 83.5% of consumers will spend less this Halloween, and over 36% of customer will buy less candy.

How will that bode for candy makers like Hershey (NYSE:HSY), Nestle (PINK:NSRGY), Tootsie Roll Industries (NYSE:TR), and Kraft (NASDAQ:KRFT), who is responsible for the distribution of Mondelez's (NASDAQ:MDLZ) Cadbury product in the US?

Hershey reported 3Q profits on Thursday, boasting a .04% gain in market share. Sales were nearly $100 million higher than they were in 3Q 2011. The maker of Almond Joys, Kit Kat bars, and chocolate Kisses raised its fiscal 2012 sales-growth range to between 14% and 15%, up from the 12% to 14% projection made earlier this year. Historically, Hershey sees its greatest sales during Q4 thanks to holiday and Halloween sales. Hershey's CEO John Bilbrey said that Halloween sales are "off to a good start."

Tootsie Roll Industries, one of the few remaining independent candy makers in the US, as reported by the Wall Street Journal, released 3Q earnings this week as well. Net profit was very strong, rising 22% on, strong pre-Halloween sales, as well as lower input costs and higher retail pricing. At a $1.5 billion market cap, Tootsie Roll is a mere fraction of Hershey's $15.8 billion chocolate empire.

This week, Wall St. Cheat Sheet questioned whether or not Tootsie Roll was a good Halloween stock pick. Shares get a little play around Halloween, but the company's notorious secrecy -- it does not release guidance or quarterly reports -- might leave investors feeling a little spooked.

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